Statistics Canada reported this morning that Canada's headline consumer price index rose 1.9 percent year-on-year in September, the same pace as in August. Once again the key factor keeping the headline reading just below the Bank of Canada's 2 percent target was the price of gasoline, which was 10 percent lower in September than in the same month last year. Excluding gasoline, the annual increase in CPI stood at 2.4 percent, the same as in August.
On an annual basis, all three of the Bank's preferred measures of core inflation edged up by 0.1 percentage point in September. The average of these three measures stood at 2.1 percent in the month, up from 2.0 percent in August -- hardly enough to trouble the Bank.
Once the Federal election is out of the way next Monday (21st), the way will be clear for the Bank to adjust its policy settings, if it sees fit, without risking accusations of political interference. The next Governing Council meeting is on the last day of the month. There seems no reason for the Bank to make any changes this time: inflation seems well in check, while the recent strong employment data show that the economy is in no need of additional monetary policy support at this time. The next rate change is almost certain to be a cut, but the Bank will likely remain comfortable lagging the Fed's easing cycle unless the exchange rate starts to strengthen.
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